The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fidelity Bank (Bahamas) chief executive has warned that “government interference” threatens to impact industry profitability, especially should it move ahead with a revised Homeowners Protection Bill.

Anwer Sunderji, writing in the BISX-listed commercial bank’s just-released 2015 annual report, said its Board and management were “less sanguine” about the future following a year in which total comprehensive income jumped 47 per cent to over $20 million.

“Rising competition, government interference, and prospect for elections in 2017 are negative factors. We expect 2016 results to be marginally better than 2015,” he warned shareholders.

Asked by Tribune Business what he meant by ‘government interference’, Mr Sunderji yesterday indicated he was alluding largely to the Homeowners Protection Bill, which the Christie administration is looking to resuscitate.

He warned that its passage into law might encourage Bahamas-based commercial banks “to simply leave the mortgage business”, a development that would worsen the very housing market crisis it is intended to help cure.

The Bill, which was brought to the House early in the Christie administration’s term in office, but never made it into law, is likely to have undergone some subsequent revisions.

However, in its early incarnation, many in the banking industry saw it as well-intentioned legislation that would provoke numerous unintended consequences.

While the Bill is designed to make troubled Bahamian borrowers more secure in their homes, it would have made it far more difficult, costly and time consuming for banks to secure - and take possession of - distressed assets.

And inserting the already-clogged court system into the contract between lender and borrower would have provided a further disincentive for banks to lend, Tribune Business was told then, or entice them to raise interest rates to compensate for the increased risk.

The end result, industry sources said, would have been a further pull-back in commercial bank mortgage lending, exacerbating the current Bahamian housing crisis.

Prime Minister Perry Christie, in his 2016-2017 Budget address, confirmed that the Homeowners Protection Bill was back on the Government’s agenda, and viewed as a complement to the Mortgage Relief plan.

Revealing that the Government was in discussions with the Clearing Banks Association over guidelines on how to treat delinquent mortgagors, Mr Christie said: “We want to ensure that a Bahamian who is delinquent is afforded opportunities to retain his or her home or, if all else fails, gives up that home in a dignified manner.

“To achieve this objective of which I have spoken - to keep Bahamians in their homes - a revised Homeowners Protection Bill will be presented to this House for passage before the end of this calendar year. We are in the process of settling this.”

The Government is also under pressure on this issue from Marco City MP, Gregory Moss, who had introduced similar legislation in the House of Assembly as a Private Members Bill.

Mr Sunderji, meanwhile, said there appeared to be a correlation between an increase in borrower delinquencies and the announcement of Mortgage Relief Plans by the Government.

“Every time they announce a Mortgage Relief Plan, people stop paying us,” he told Tribune Business. “We’ve noticed a trend because people want to take advantage of it. It’s pure moral hazard.”

Mr Sunderji acknowledged that loan delinquencies were “perhaps the biggest problem facing the industry”.

Referring to the Mortgage Relief Plan, he added: “The Government of the Bahamas is keen to rescue Bahamians ‘underwater’ and wants banks to consider offering the mortgages to them at close to written down value.”

This, he suggested, would enable banks to “free up” bad debt expenses and have more capital to lend.

“The bank has 231 delinquent loans valued at over $20 million, with an additional nearly 50 loans becoming delinquent just in 2015,” Mr Sunderji said of Fidelity Bank (Bahamas).

“It’s a tough trading environment, very hard. Quarter-over-quarter we’re about on track. We’re tracking last year.”